A REMINDER THAT EVEN THE MOST CAPABLE SHALE PLAYERS GET IT WRONG FROM TIME TO TIME
Firm says drilling in Lake and Fairmount townships reveals insufficient natural gas.
MATT HUGHES
mhughes@timesleader.com
The only company to drill Marcellus Shale gas wells in Luzerne County is pulling out of the region.
First reported online at
3:17 p.m.
on timesleader.com
Encana Oil & Gas USA Inc. announced Thursday that the two exploratory wells it has drilled in the county are unlikely to produce natural gas in commercial quantities, and that the company has, as a result, decided to immediately cease operations in Luzerne and Colombia counties.
Encana and its partner company, Whitmar Exploration Co., have leased more than 25,000 acres in Luzerne County, primarily in the Back Mountain, and drilled two exploratory wells, the Buda 1H well located on property owned by Edward Buda off state Route 118 in Fairmount Township near Ricketts Glen State Park and the Salansky 1H well located on property owned by Amy and Paul Salansky off Zosh Road in Lake Township.
Link to complete article:
http://www.timesleader.com/news/Encana_pulls_operations_out_of_coun...
Views: 144
Replies to This Discussion
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Permalink Reply by Skip Peel - Mineral Consultant on
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Sometimes leasehold turns out to be worth $10,000/acre. Sometimes it turns out to be worth nothing.
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Permalink Reply by ken hatcher on -
Edward Buda statement..."Don't count on it until you've got it in your hand" is good advice for any shale play.
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Permalink Reply by Linda Whatley on
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You are so right Ken.
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Permalink Reply by Skip Peel - Mineral Consultant on
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IMO, it is helpful to keep in mind that comments that leasehold is worth X per acre because one company paid that to another company to acquire the asset or an interest in it totally overlooks the overall elements of risk associated with exploration and production. Companies win some and lose some and hopefully make a profit for their shareholders at the end of the day. We regularly read comments here on the site along the lines of, "they wouldn't do this or spend that if they weren't sure what was down there". Obviously that isn't always the case.
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Permalink Reply by ALongview on
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$100 per acre for 25000 acres and 2 wells at $5 million each is hardly the kind of money people are talking about when they say that Skip. 2.4 billion for a pipeline is the kind of money that people are talking about when they say that. Apples and oranges.
$2,400,000,000 > $12,500,000!
TCM, manager of the $2.4 billion TPF II LP, a private equity fund, says
the 110-mile, 24-inch system will have a design capacity of over 1
billion cubic feet (bcf) per day. The system will initiate gas
deliveries by mid-2010.
The system will traverse the Texas
portion of the Haynesville Shale gas producing formation in
Nacogdoches, San Augustine, Sabine, Shelby and Panola Counties, an area
where production requires significant additional pipeline capacity to
provide adequate access to markets. ETG will interconnect with multiple
pipelines in the region.
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Permalink Reply by Skip Peel - Mineral Consultant on
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I think you underestimate the total cost but the point is that companies regularly invest in leases and wells that do not return the capital invested and sometimes are a total loss such as this case. The ~100,000 acres of leasehold in Harrison and Panola counties and northern Caddo and Bossier parishes that Chesapeake unsuccessfully attempted to sell is another example a little closer to home. I can assure you their loss was far in excess of $12,500,000.
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Permalink Reply by adubu on
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Skip--- This is reason wells are call "Wildcat" during early drilling of the play in new locations. Correct--You Agree?
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Permalink Reply by Skip Peel - Mineral Consultant on
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A "Wildcat" well has no established "Field". The operator has a specific target prospect however that formation or zone has not been previously produced and assigned a field designation in that location. The best way to illustrate this concept is to look at sections with wells listed in different fields though they all have surface locations within that section (LA.). The fields, like units, are a layer cake in that the size, shape and extent of each may vary by depth.
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Permalink Reply by adubu on
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Skip---Yes understand the absolute definition of "Wildcat", the point I was making was to agree with your discussion that the investment did not return the capital invested was because the formation had not been proven in new area of drilling on edge of proven production in the formation so operator paid up for leases and got " burned" I assume they had not shot 3-D seismic before purchase or leased the area.
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Permalink Reply by Skip Peel - Mineral Consultant on
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Ever wonder why 3D is not shot prior to exploratory wells? Each step is a cost consideration. 3D follows commercial completions because it cost more than drilling a well or two.
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Permalink Reply by The_Baron on
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not to mentin it helps to have electrical logs and cores to corelate withy the siesmic data.
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